Monday, November 19, 2012

This chart of C&I Loans represents bank lending to small and medium-sized business. The expansion in this important source of funding for companies unable to access directly the credit market has been impressive and ongoing for the past two years. This measure of outstanding loans is up 12.5% in the past year, and is up at an annualized rate of 11.5% over the past six months. From the post-recession lows two years ago, C&I Loans are up by almost $300 billion.

The most important takeaway here is not the volume of new loans, but the fact that the ongoing increase in new lending is symptomatic of important changes on the margin: banks are more willing to lend, and businesses are more willing to borrow. This reflects improved confidence in the future, and that in turn holds out the promise of continued—albeit relatively slow—economic growth.

Natural gas prices are notoriously volatile, so I don't think the rally this year means much. But if there is any message to be found in natural gas prices, it is that natural gas remains extremely cheap relative to crude oil. This gives the U.S., now a major producer of natural gas, a key, cheap-energy advantage, especially for attracting and nurturing energy-intensive industries.

@Gloeschi, C&I loans are almost always collateralized -- I checked Scott's numbers using several of my own information sources, and his report checks out -- C&I lending has bounced back in the US as Scott is reporting -- also, we are seeing a bounce in new construction -- QE3 is inspiring new lending in a number of sectors -- the laugh is on Wall Street, which has pursued a "tight-fisted" lending policy since the economic crisis began -- most of the lending we are seeing is originating and being funded regionally, which is instructive -- however, once the bounce becomes real, I expect Wall Street to jump in quickly -- the Fed is targeting Main Street activities at this point -- investors should already be transferred into small and medium-sized firm value funds at this point -- the largest firms in the economy are still on the ropes, and will likely remain challenged as fiscal policy begins to shift away from funding the military-industrial complex in favor of "nation-building" programs here at home -- again, small and medium-cap value should be the focus -- demand higher dividends and rents along the way.

PPS: No doubt about it, real estate development and construction is posturing for growth -- keep an eye on California for signals regarding the future of the macro-economy -- Main Street is "lean and mean" and poised for deal flow -- conversely, public employment, the military-industrial complex, and the medical complex may be facing harder times -- I am expecting the US to go off the fiscal cliff, which will set in motion real challenges for government employees, the military-industrial complex, and the medical establishment...